Bookkeeping records business transactions in a company’s financial books. Traditional manual methods involve handwritten journal entries, while electronic software has different posting methods. Accurate transactions are crucial to accounting systems, and internal controls are necessary for large organizations.
Bookkeeping is the accounting activity in which accountants record business transactions in a company’s financial books. In reality, there are not many different ways to record accounting transactions. All of the methods essentially do the same thing, although the written format may be slightly different. Using electronic accounting software often has different methods of posting to general ledgers, although the biggest difference is in how an accountant does it and not in the end result. Accurate accounting transactions are one of the main pillars of an accounting information system.
The classic method of publishing in ledgers is to create a handwritten journal entry. In all journal entries, debits come first, at the top of the entry, with credits second. The journal entry needs a date, an account number and a name for the debit and credit lines, and a dollar figure for each debit and credit. A brief description goes below the last credit line on the entry. Once self-written, an accountant updates each account for the dollar amounts in the entry by handwriting the entry to the ledgers in a manual accounting system.
Manual accounting systems are often tedious to update when posting to general ledgers. Traditionally, a business would have many different paper ledgers and journals in the system. Accountants would have to find the necessary books and then write the entry in each clearly and precisely. Today, a manual accounting system can refer to a series of spreadsheets that do not have a single point of data entry, much like accounting software. Spreadsheets can also be difficult to maintain manually.
Using accounting software to maintain a company’s books may seem easier to maintain when posted to general ledgers. A journal entry screen is available for most systems and requires the same basic information as a manual journal entry, the date, account number and name of the debit and credit lines and a dollar figure for every debit and credit. However, a major problem comes from inaccurate data entered into the accounting system. There are no physical journals or journals, so errors must be tracked electronically and corrected using the system. There is no simple wipe and write back procedure in many cases, which can make it difficult to make major fixes.
Most accounting systems work on a perpetual method. Each accounting transaction enters the journals and ledgers as they occur. Posting to the ledgers, therefore, is one of the most common accounting tasks. Large organizations can have hundreds, even thousands, of transactions per month. Internal controls must be in place to ensure that accurate and relevant transactions are recorded in a timely manner.
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